Caesar’s, Boyd Up After New Jersey Approves Online Gambling

By Sam Mamudi

New Jersey is boosting at least two stocks this morning, with Caesar’s Entertainment (CZR) and Boyd Gaming (BYD) up as much as 4% after the state approved a law to allow online gambling.

The move is important for casino stocks for two reasons: New Jersey is the biggest state yet to approve Internet gambling, and the law may establish a framework for other states to easily adopt. As WSJ’s Alexandra Berzon explains:

The law, passed by the legislature and signed Tuesday by Gov. Chris Christie, for now requires bettors to be physically present in the state, which industry executives and regulators believe can be verified with technology that tracks a user’s location. But bets could conceivably be placed from any device with an Internet connection.

New Jersey’s move marks a significant turning point in the debate over online gambling in the U.S., which has been raging for more than a decade. But while it could encourage similar measures in other states, big hurdles remain to widespread acceptance of such gambling.

Until a year ago, the federal government considered such gambling illegal and targeted online-gambling companies and their partners with criminal and civil lawsuits. But in 2011 the Justice Department reversed itself, prompting many states to consider legalizing online gambling and lottery directors to start selling tickets online.

Berzon adds that online gambling networks should be up and running in Nevada and Delaware later this year. The new hubs may also try to become centers of interstate networks, she notes:

Such agreements, modeled after lottery compacts that create pooled drawings for games such as Powerball or Mega Millions, could be particularly useful for smaller states operating online poker by giving them access to more players.

Nevada and New Jersey may try to become regulatory hubs for other regions, officials and industry watchers say, allowing their licensed companies to have an advantage in other jurisdictions while sharing the revenues with other states.

Yet while simple in theory, creating interstate networks is likely to be tough since gambling is regulated state by state in varying ways, say people working on the issue. A state’s gambling interests would be unlikely to want their state government to enter into deals that would put them at a disadvantage to interests in other states.

While casino owners Ceasar’s and Boyd are obvious beneficiaries of New Jersey’s new law, this piece in The Street suggests Zynga (ZNGA) could also reap rewards:

Zynga may stand to benefit, due in large part to its popular Texas Hold ‘Em app, Zynga Poker. Last June, Zynga Poker had 30 million monthly average users, according to Mike Gupta, the company’s then treasurer and vice president of finance. Gupta also told TheStreet that online gambling was on the company’s radar. “It is something we’re exploring,” he said. “We think it’s an interesting adjacency to what we do in our core business.”

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